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Sunday Editorial: Selling JEA has never made sense in the past — and it may not now either

Selling JEA is an idea that comes up with every new set of city officials. But it’s never as simple as it first appears.

The utility has long been considered the golden goose because its revenues are so easily tapped for city government. But the politics implied by that fact have sometimes led to poor results for the customers.

For instance, a reluctance to raise rates in the early 2000s led JEA to build up large amounts of debt.

And an over-reliance on one source of fuel eventually led to huge increases in electric rates.

In both cases, the political pressures placed on the ostensibly independent utility were huge.

Now JEA board member Tom Petway has suggested that JEA explore the possibility of privatization.

It’s an intriguing thought.

Would an investor-owned electric utility serve area customers better? Would the city receive a windfall of cash that could be used for all kinds of local needs?

There is no harm in such an analysis, but something new will have to be found to make the finances work.

Selling to a huge utility like Florida Power &Light certainly would give Jacksonville customers benefits of its economies of scale as well as a diversified power portfolio that includes nuclear power and a growing amount of solar power.

But selling JEA has been analyzed twice in recent years by the City Council Auditor’s Office with reports issued in 2007 and updated in 2012.

In both cases, the math simply didn’t add up for city government.

In the 2012 analysis, the auditor estimated an annual revenue stream from a sale of $24 million and annual ad valorem taxes of $62 million.

That total of $86 million would be offset by the loss of $102 million of the JEA’s contributions to the city at that time.

That’s a $16 million annual shortfall.

So there’s no windfall for city government there.

Those numbers certainly could be updated, but the principles would remain. There would have to be some additional revenue source to make up the difference.

And there are many other issues to factor into a sale.

the SCHOOLS WOULD be a big winner

The biggest winner in the sale of the JEA would be the Duval County Public Schools. The school system currently receives no contributions in lieu of taxes from JEA, which is typical for municipal utilities.

As the Times-Union Editorial Board has long stated, the school system has been shortchanged for generations under this arrangement.

Under the 2012 scenario, the school system could receive as much as $46.8 million in annual tax revenues from an investor-owned utility.

You could argue that Jacksonville generally would be better off with this massive infusion of revenue to the public schools. Still, the city government would have to find revenue to make up the annual shortfall from a sale.

LOSS OF JOBS

A major downside to a sale that is not often mentioned is the presumed loss of about 750 high-paying JEA jobs with annual salaries and benefits totaling more than $70 million.

Again, those were the estimated numbers in 2012.

But the big picture remains the same.

Would a buyer agree to grandfather these jobs in Duval County? And even under a grandfathered scenario, it would seem that some jobs would be lost.

VALUE OF COAL PLANTS

JEA and its partner FP&L are shutting down a jointly owned coal plant. Coal plants simply are not economical these days with the low fuel and operating costs of natural gas power plants. So what are JEA’s coal plants worth? Who wants a white elephant?

And what’s the assurance that a buyer would even maintain power plants in Duval County? What’s to stop an investor-owned utility from building a plant in Baker County, for example?

There goes local property tax revenues.

LOCAL CONTROL

Oversight of investor-owned utilities is conducted by the Florida Public Service Commission. Local influence over the electric utility would be diluted. No longer could a mayor force the resignations of JEA board members — because there wouldn’t be a JEA.

“It is doubtful that an investor-owned utility based outside of Jacksonville would partner as closely with the city as JEA,” the auditor’s report stated.

ECONOMIES OF SCALE

Florida Power &Light replaced 5 million of its electric meters with smart meters according to its own design. Those meters allow FP&L to know instantly which homes have lost power. The utility also is a major builder and user of solar energy.

Though JEA is a large municipal utility with its own solar farm, it doesn’t compare to FP&L’s size.

ELECTRIC RATES

In recent years, FP&L’s rates have been lower than JEA’s — but the gap has been closing thanks to recent rate increases from FP&L.

The Jacksonville Electric Authority changed its name to JEA years ago because it was no longer just an electric utility. It took over the city’s water and sewer utility, investing billions in upgrades.

Would a water-sewer system be included in a sale?

It might revert back to the city.

In short, there is no harm in conducting another deep dive into a possible sale of JEA. Perhaps there is something that the previous council auditor analyses missed.

Sunday Editorial: Selling JEA has never made sense in the past — and it may not now either- By